The effect of the economic boost can be seen in export financing
Finnvera’s number of clients is over 27,000 of which approximately 100 are large corporates. However, measured in euros, the highest volume comes from the large corporates’ export trade financing. The total exposure of Finnvera’s export credit guarantee and special guarantees amounted more than EUR 23 billion at the end of June. The exposure has risen as a result of strong demand for financing especially in the cruise ship sector and telecommunications in the United States, says Executive Vice President Jussi Haarasilta.
Finnvera’s half-year report shows that the ten largest exposures i. e. buyers account for 71 per cent of all outstanding guarantees.
The main sectors in export financing exposure are shipping, telecommunications and forest industry that account for 89 per cent of the total exposure.
”Sectoral concentration is a well-known factor that is part of the nature of export credit guarantees. In Finland, these three are the biggest export sectors whose projects Finnvera is involved in by guaranteeing and financing. Through reinsurance, we prepare for increased exposures and also strive to mitigate the sectoral concentration. Reinsurance is a keypart of our risk management. According to our risk management strategy we also search for new covering methods”, says Executive Vice President Jussi Haarasilta.
As a result of the economic expansion and good economical situation in recent years companies’ finances are on a sustainable base.
In Finnvera’s exposure the risk ratings of enterprises, banks and countries have remained largely unchanged, and new large exposures mainly fall into good risk categories.
Financing assosiated to future deliveries
At the end of June, the subsidiary Finnish Export Credit Ltd had export credit agreements amounting to EUR 12.8 billion (EUR 12.5 billion), including drawn credits totalling EUR 5.6 billion (EUR 4.8 billion) and credit commitments totalling EUR 7.2 billion (EUR 7.7 billion). The credit risks associated with this exposure are fully covered by means of export credit guarantees granted by the parent company Finnvera plc that are included in the above-mentioned total exposure for export financing.
However, during the first half of this year, the number of new major export projects entering the pipeline was lower than last year.
”We stated in our financial statements in the spring as well as in our half-year report in June that more than half of the total exposures for large corporates' export credit guarantees and special guarantees was tenders or agreements associated with future deliveries. It is exceptional in Finnvera’s history and reflects the fact that companies have demand extending years ahead. Of the more than EUR 23 billion exposures undrawn guarantees amount to EUR 13 billion. This means that we have made a binding agreement of an export credit guarantee or financing and it is drawn when the product is ready to be handed over to the buyer.”
A positive development is that SME and midcap export has picked up. During the first half of the year a greater share of SME and midcap financing granted by Finnvera is targeted at investments and export projects. Our goal is to accelerate investments and export projects with the aid of advisory services, together with other providers of financing and credit insurers.
This is how buyer financing works – watch our video (in Finnish)